1. Computing yields on TBills Formula for the Yield on a Treasury Bill: Where F = face value (100%) .P= Purchase price .N= # of days to maturity Compute yields for the following TBills .99.718% 43 days .98.967% 155 days .98.000% 295 days 2. Using the Fisher Equation and the Corresponding Rates on Nominal Treasury Notes and TIPS, Compute the Average Expected Inflation Rate Over the Next (a) Three Years, and (b) Eight Years. Use the closest maturities of nominal and TIPS Treasuries for each time horizon. Fisher Equation: i = 1, + Yields on Nominal Treasuries Maturity Coupon Ask Price Ask Yield 7/15/2023 7.125 120.7656 2.620 8/28/2023 1.500 94.6406 2.656 10/31/2023 1.500 94.5625 2.654 11/30/2023 1.625 95.0234 2.666 2/15/2028 2.750 B/15/2028 5.500 11/15/2028 5.250 98.9219 2.875 123.4063 2.888 121.5547 2.891 Yields on TIPS (Real Interest Rates) Ask Maturity Coupon Price Ask Yield 2023 Jul 15 0.125 98.14 0.451 2023 Oct 15 99.25 0.418 0.375 2028 Aug 15 1.750 109.18 0.741 2028 Nov 15 3.625 127.30 0.750 3. Why does the spread of the yields between Junk bonds and AAA bonds widen during financial crises or recessions? 4. What is a sinking fund provision in a bond indenture, and how does it make a bond issue less risky? 5. Why does a call provision in a bond indenture normally require the bonds be redeemed at a premium to their par value